NonProfit Organizations

1
Non-Profit Organizations

• Presented by
• Kakoo Oiwi
• www.nativehawaii.org

2
What is a non-profit organization?

• A non profit organization is an organized legal
  entity created for specific purposes the
  government has identified as beneficial to the
  public welfare and that does not provide private
  inurement to any private shareholder or
  individual.

3
What?

• You have to be doing good things
• The government defines what those good things
  are in the Internal Revenue Code
• You cannot be making couple people rich

4
Non-profit... No profit...Same thing...

• WRONG!!!

5
For-profit vs. Non-profit

• Individuals hold equity in the organization
  (i.e., owners or stockholders)
• Operated for the benefit of its owners (i.e.,
  maximization of profits)

• Cannot engage in private inurement (i.e., no
  owners or stockholders)
• Operated for the benefit of the public or its
  beneficiaries

6
Profits for non-profits

• Not-for-profit, or nonprofit, is not synonymous
  with unprofitable. In fact, the term is not only
  a misnomer but has impeded many nonprofits from
  succeeding in their missions and being good
  stewards of the resources entrusted to them by
  donors. Nonprofits have been able to engage in
  for-profit activities, possibly even free of the
  unrelated business income tax (UBIT), as long the
  activities further their charitable purposes and
  do not constitute a substantial part of their
  activities. These efforts can be chancy because
  the entire burden, cost, and risk of failure
  remain on the nonprofit.
• From True Sustainability A New Model to Aid
  Nonprofits in Developing Self-Sustaining Revenue
  Streams (http//www.guidestar.org/DisplayArticle.d
  o?articleId795)

7
Okay... So whats a Super 8(a)?

• A disgression to the Small Business
  Administration...

8
Small Business Administration 124.3
Native Hawaiian Organization means any community
service organization serving Native Hawaiians in
the State of Hawaii which is a not-for-profit
organization chartered by the State of Hawaii, is
controlled by Native Hawaiians, and whose
business activities will principally benefit such
Native Hawaiians.
9
The Native Hawaiian Organization (NHO) An NHO
is a community service organization serving
Native Hawaiians A non-profit corporation that
has filed articles of incorporation with the
Hawaii Department of Commerce and Consumer
Affairs Is controlled by Native Hawaiians Whose
activities principally benefit Native
Hawaiians For profit 8(a) firms may become
subsidiaries of NHOs The NHO must acquire 51 of
the 8(a) firm The 8(a) firm can be located
anywhere in the United States The Benefit
non-bid contracts of unlimited size
10
PUBLIC LAW 108-87-SEPT. 30, 2003
Provided further, That businesses certified as
8(a) by the Small Business Administration
pursuant to section 8(a)(15) of Public Law
85-536, as amended, shall have the same status as
other program participants under section 602 of
Public Law 100-656, 102 Stat. 3825 (Business
Opportunity Development Reform Act of 1988) for
purposes of contracting with agencies of the
Department of Defense.
11
SBAs 8(a) Program The firm must qualify as a
small business The firm must be a for-profit
small business The firm must be owned and
controlled by a minority person The controlling
individual/individuals must be U.S. citizens The
individuals personal assets must be less than
250,000 This excludes the personal home and
business assets The firm must have a minimum of 2
years of experience to join the 8(a) program The
firm can be in the program for nine years The
8(a) firm can receive non-bid contracts up to 3
million
12
Defense Federal Acquisition Regulation
Supplement Sole Source 8(a) Awards to Small
Business Concerns Owned by Native awaiian
OrganizationsAGENCY Department of Defense
(DoD).ACTION Interim rule with request for
comments.---------------------------------------
--------------------------------SUMMARY DoD
has issued an interim rule amending the Defense
Federal Acquisition Regulation Supplement (DFARS)
to implement DoD appropriations act provisions
permitting the award of sole source contracts to
small business concerns owned by Native Hawaiian
Organizations. The rule applies to manufacturing
contacts exceeding 5,000,000 and
non-manufacturing contracts exceeding 3,000,000
that are awarded under the Small Business
Administration's 8(a) Program.DATES Effective
Date July 26, 2005.    Comment date Comments
on the interim rule should be submitted to the
address shown below on or before September 26,
2005 to be considered in the formation of the
final rule.
13
Digression over...

• Mahalo to the Small Business Administration for
  their slides...

14
Now about those good things...

• "Public benefit corporation" means any
  corporation designated by statute as a public
  benefit corporation, or any corporation that is
  recognized as exempt under section 501(c)(3) of
  the Internal Revenue Code of 1986, as amended, or
  that is organized for public or charitable
  purposes and upon dissolution must distribute its
  assets to a public benefit corporation, the
  United States, a state, or a person recognized as
  exempt under section 501(c)(3) of the Internal
  Revenue Code of 1986, as amended.

15
Kden... says who???

• The State...

16
HRS 414DHawaii Nonprofit Corporations Act

• http//www.capitol.hawaii.gov/hrscurrent/Vol08_Ch0
  401-0429/HRS0414D/
• Department of Commerce and Consumer Affairs
• Business Registration Division
• (In the old post office building across from
  Iolani Palace, 2nd floor)

17

• 414D-32  Articles of incorporation.  (a)  The
  articles of incorporation shall set forth
•      (1)  A corporate name for the corporation
  that satisfies the requirements of section
  414D-61
•      (2)  The mailing address of the
  corporation's initial principal office, the
  street address of the corporation's initial
  registered office, and the name of its initial
  registered agent at its initial registered
  office
•      (3)  The name and address of each
  incorporator
•      (4)  Whether or not the corporation will
  have members and
•      (5)  Provisions not inconsistent with law
  regarding the distribution of assets on
  dissolution.
•      (b)  The articles of incorporation may set
  forth
•      (1)  The purpose or purposes for which the
  corporation is organized, which may be, either
  alone or in combination with other purposes, the
  transaction of any lawful activity
•      (2)  The names and addresses of the
  individuals who are to serve as the initial
  directors
•      (3)  Provisions not inconsistent with law
  regarding
•          (A)  Managing and regulating the affairs
  of the corporation
•          (B)  Defining, limiting, and regulating
  the powers of the corporation, its board of
  directors, and members (or any class of members),
  including but not limited to the power to merge
  with another corporation, convert to another type
  of entity, sell all or substantially all of the
  corporation's assets, or dissolve the
  corporation and
•          (C)  The characteristics,
  qualifications, rights, limitations, and
  obligations attaching to each or any class of
  members
•      (4)  Any provision that under this chapter
  is required or permitted to be set forth in the
  bylaws
•      (5)  Provisions eliminating or limiting the
  personal liability of a director to the
  corporation or members of the corporation for
  monetary damages for breach of the director's
  duties to the corporation and its members
  provided that such a provision may not eliminate
  or limit the liability of a director
•          (A)  For any breach of the director's
  duty of loyalty to the corporation or its
  members
•          (B)  For acts or omissions not in good
  faith or which involve intentional misconduct or
  a knowing violation of law
•          (C)  For any transaction from which a
  director derived an improper personal economic
  benefit or
•          (D)  Under sections 414D-150 to
  414D-152.

18
Members...

• Youre not required to have them

19
Board of Directors

• 414D-131  Requirement for and duties of the
  board.  (a)  Each corporation shall have a board
  of directors.
•      (b)  Except as provided in this chapter or
  subsection (c), all corporate powers shall be
  exercised by or under the authority of its board
  including the management of the corporation's
  affairs.
•      (c)  The articles may authorize a person or
  persons to exercise some or all of the powers
  which would otherwise be exercised by a board. 
  To the extent so authorized, any such person or
  persons shall have the duties and
  responsibilities of the directors, and the
  directors shall be relieved to that extent from
  such duties and responsibilities. L 2001, c 105,
  pt of 1

20

• 414D-132  Qualifications of directors.  All
  directors shall be individuals.  A director need
  not be a resident of this State or a member of
  the corporation unless required by the articles
  of incorporation or the bylaws.  The articles or
  bylaws may prescribe other qualifications for
  directors. L 2001, c 105, pt of 1

21

• 414D-133  Number of directors.  (a)  A board
  of directors shall consist of three or more
  individuals, with the number specified in or
  fixed in accordance with the articles or bylaws.
•      (b)  The number of directors may be
  increased or decreased (but to no fewer than
  three) from time to time by amendment to or in
  the manner prescribed in the articles or bylaws.
  L 2001, c 105, pt of 1

22
More on members...

• 414D-134  Election, designation, and
  appointment of directors.  (a)  If the
  corporation has members, all the directors
  (except the initial directors) shall be elected
  at the first annual meeting of members, and at
  each annual meeting thereafter, unless the
  articles or bylaws provide some other time or
  method of election, or provide that some of the
  directors are appointed by some other person or
  designated representative.
•      (b)  If the corporation does not have
  members, all the directors (except the initial
  directors) shall be elected, appointed, or
  designated as provided in the articles or bylaws.
  If no method of designation or appointment is set
  forth in the articles or bylaws, the directors
  (other than the initial directors) shall be
  elected by the board. L 2001, c 105, pt of 1

23
Bylaws

• 414D-36  Bylaws.  (a)  The incorporators or
  board of directors of a corporation shall adopt
  initial bylaws for the corporation.
•      (b)  The bylaws may contain any provision
  for regulating and managing the affairs of the
  corporation that is not inconsistent with law or
  the articles of incorporation. L 2001, c 105, pt
  of 1

24
(No Transcript)
25
(No Transcript)
26
Meet the IRS

• www.irs.gov

27

• Charity - Required Provisions for Articles
•   A charity's organizing document must limit the
  organization's purposes to one or more of the
  exempt purposes set forth in section 501(c)(3)
  and must not expressly empower it to engage,
  other than as an insubstantial part of its
  activities, in activities that are not in
  furtherance of one or more of those purposes.
  This requirement may be met if the purposes
  stated in the organizing document are limited in
  some way by reference to section 501(c)(3). In
  addition, assets of an organization must be
  permanently dedicated to an exempt purpose.  This
  means that should an organization dissolve, its
  assets must be distributed for an exempt purpose
  described in section 501(c)(3), or to the federal
  government or to a state or local government for
  a public purpose.  To establish that an
  organization's assets will be permanently
  dedicated to an exempt purpose, the organizing
  document should contain a provision insuring
  their distribution for an exempt purpose in the
  event of dissolution.  Although reliance may be
  placed upon state law to establish permanent
  dedication of assets for exempt purposes, an
  organization's application can be processed by
  the IRS more rapidly if its organizing
  document includes a provision insuring permanent
  dedication of assets for exempt purposes.  For
  examples of provisions that meet these
  requirements, see Sample Articles.
• If the organizing document does not contain
  these provisions, an organization should amend it
  before submitting its exemption application.  See
  Amending Organizing Documents for more
  information.

28
Whats missing?A lot...

• Third Said corporation is organized exclusively
  for charitable, religious, educational, and
  scientific purposes, including, for such
  purposes, the making of distributions to
  organizations that qualify as exempt
  organizations under section 501(c)(3) of the
  Internal Revenue Code, or the corresponding
  section of any future federal tax code.
• Fifth No part of the net earnings of the
  corporation shall inure to the benefit of, or be
  distributable to its members, trustees, officers,
  or other private persons, except that the
  corporation shall be authorized and empowered to
  pay reasonable compensation for services rendered
  and to make payments and distributions in
  furtherance of the purposes set forth in Article
  Third hereof. No substantial part of the
  activities of the corporation shall be the
  carrying on of propaganda, or otherwise
  attempting to influence legislation, and the
  corporation shall not participate in, or
  intervene in (including the publishing or
  distribution of statements) any political
  campaign on behalf of or in opposition to any
  candidate for public office. Notwithstanding any
  other provision of these articles, the
  corporation shall not carry on any other
  activities not permitted to be carried on (a) by
  a corporation exempt from federal income tax
  under section 501(c)(3) of the Internal Revenue
  Code, or the corresponding section of any future
  federal tax code, or (b) by a corporation,
  contributions to which are deductible under
  section 170(c)(2) of the Internal Revenue Code,
  or the corresponding section of any future
  federal tax code. If reference to federal law
  in articles of incorporation imposes a limitation
  that is invalid in your state, you may wish to
  substitute the following for the last sentence of
  the preceding paragraph "Notwithstanding any
  other provision of these articles, this
  corporation shall not, except to an insubstantial
  degree, engage in any activities or exercise any
  powers that are not in furtherance of the
  purposes of this corporation." Sixth Upon the
  dissolution of the corporation, assets shall be
  distributed for one or more exempt purposes
  within the meaning of section 501(c)(3) of the
  Internal Revenue Code, or the corresponding
  section of any future federal tax code, or shall
  be distributed to the federal government, or to a
  state or local government, for a public purpose.
  Any such assets not so disposed of shall be
  disposed of by a Court of Competent Jurisdiction
  of the county in which the principal office of
  the corporation is then located, exclusively for
  such purposes or to such organization or
  organizations, as said Court shall determine,
  which are organized and operated exclusively for
  such purposes.

29
For next week...

• Bring your articles and bylaws if you have them
• If not...
• Choose an incorporator
• Choose a registered agent
• Select directors
• Decide on your purpose/goal/mission
• Decide if you will have members
• Bring all the needed addresses!!!

30
A hui hou!